Cape Town Meeting Must Get Design of Green Climate Fund Right Before Durban

Update, 10/21/11:Talks to design the Green Climate Fund (GCF) ended in tense negotiations at Cape Town, South Africa earlier this week. The completion of the GCF design is an integral part of the larger package of issues to be resolved in Durban, and so country negotiators were highly motivated to make progress.The 40-member Transitional Committee, responsible for the design of the GCF, almost reached consensus on a balanced design document to send to COP-17 Durban at the end of the year, despite major differences between developing and industrialized countries at the beginning of their fourth and final meeting. However, in the final hour the United States and Saudi Arabia objected, citing unresolved issues. As a result, the TC decided to forward the draft design document (known as the “governing instrument”), along with a report of its work, to the larger COP for consideration and approval in Durban. Because it is a draft, Parties will have the ability to re-open different issues on the design of the GCF, which could make it more difficult to come to agreement on the final design.

The Transitional Committee (TC) for the design of the Green Climate Fund (GCF) will convene in Cape Town this weekend for its fourth and final meeting. At this meeting, the group will need to agree on its recommendations to present at the Durban UNFCCC climate change talks in December.

The decision on the GCF is a key component of the “finance package” and the centerpiece of a broader set of balanced outcomes for the Durban meeting. Members of the TC meeting in Cape Town will need to demonstrate a sense of collegiality and collective ownership to reach an ambitious, fair and balanced outcome, and get the job done.

(The GCF was established through the Cancun Agreements to deliver large scale financial resources to developing countries for climate change adaptation and mitigation. It is seen by many, particularly developing countries, as an opportunity to create a ‘legitimate’ institution for delivering scaled-up finance to address climate change).

The Transitional Committee's job will not be easy and there remain a number of difficult issues to resolve. For example, the relationship between the GCF and the UNFCCC Conference of the Parties (COP) – how can it be ensured that the GCF Board will be accountable to the COP and yet enjoy sufficient independence to effectively run the GCF? Another difficult issue has been the legal status of the Fund – should it have its own legal personality, allowing it to operate independently of any existing institution, or should it rely on an existing organization for its legal capacity?

There has also been much debate on how to leverage capital owned and controlled by the private sector – should there be a special facility to cater to this group so that there is room for private sector innovation? Or should it be left to developing country governments and institutions to use GCF resources to create their own incentives for the private sector, so that the private sector’s actions are aligned with country strategies and priorities?

Finally, and perhaps most importantly, what signal can the Transitional Committee send regarding how the GCF will be resourced? What will the initial capitalization of the GCF be, and how can the TC ensure that the GCF is scalable over time and financed by a wide range of sources, including over the long term? The signal sent by the TC on the GCF will also indicate how developed countries intend to mobilize sources to reach the Copenhagen commitment of mobilizing US$100 billion per year by 2020 to address climate change in developing countries.

An effective, equitable and ambitious GCF needs to encompass:

support for national ownership and country-driven strategies and priorities;

the opportunity for countries to access funds directly, without the need for intermediation by international institutions;

the flexibility to accommodate multiple funding sources that can be scaled up over time, and that can leverage private sector funds;

a balanced allocation of funds for adaptation and mitigation and for the most vulnerable countries; and

mechanisms to ensure accountability for results, financial management and environmental and social safeguards, as well as robust mechanisms for effective civil society participation.

These elements should result in a Fund that can catalyze developing countries’ transition to low-carbon and climate-resilient economies.

None of the issues described here are easy to address. The challenges faced by the Transitional Committee are real, but they are not insurmountable. It will take strong commitment and cooperation among TC members to resolve some of the fundamental differences of opinions and to design a fund that developed and developing countries alike will have confidence in, and that developed countries will put funds in.

The Transitional Committee members have a unique opportunity to create an entity that will truly transform the climate finance landscape and give developing countries the means to transform their economies. TC members need to seize this opportunity and seek common ground in order to collectively come up with a design that can win broad support in Durban.